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Homeowners at Risk must be Included in the Bailout

By Byron A. Ellis-September 22, 2008

Democrats should not support the Republican bailout if it does not include provisions to bailout homeowners plagued by foreclosures and a cap on executive pay of failing financial institutions. However, the Republicans do not believe in helping middle class or penalizing executives for poor performance. 

The administration wants Congress to approve $700 billion bailout package for failed financial firms by using taxpayers’ money.

Obama and the Democrats must not give in, there should be no bailout if homeowners in foreclosure are excluded from the deal and executive compensation for failing firm is not capped.

Secretary Paulson and the Administration are resisting help for the middle class arguing that including the middle class homeowners in financial problems would slow passage of the bill. According to Paulson “The biggest help we can give the American people right now is to stabilize the financial system.”

However, homeowners in foreclosure know that the biggest help that they can receive is relief from the foreclosure process. Hence, clearly, Paulson’s argument is inaccurate.

Senator Schumer, another Democrat said, “…we need to put the taxpayer first ahead of bondholders, shareholders.” But, Republican lawmakers continue to argue that Democratic efforts to include homeowners would slow the process down.

The Republican preoccupation with the process being slowed down if homeowners are included is merely a ploy to exclude homeowners from the bailout.

Private spending by consumers constitutes approximate 60 percent of gross domestic spending and by firms about 20 percent. Therefore, why should government bailout the 20 percent and ignore portions of the 60 percent. It is the latter that drives the nation’s income and not the former.

Lets focus and restoring consumers’ buying power and not restore the income of Wall Street fat cats. Where is the Republican meritocracy mantra? Do failing financial institution merit government rewards? If they do, failing homeowners deserve equal treatment.

Republicans told the American public that homeowners in foreclosure do not deserve to be bailout because they used bad judgment. Now they tell American public that the fat cats in Wall Street deserve a bailout because the economic system will collapse. These are the same individuals that were incapable of foreseen the economic crisis, so why should we trust their judgment?

Bernanke’s opinion piece in the Wall Street Journal, The Goldilocks Economy (July 27, 2005) proclaimed that the good economics policies of the Bush administration has resulted in robust employment and output growth. Furthermore, according to Herb Greenberg, a year ago Bernanke speaking from South Africa said there doesn’t appear to be major spillovers from housing onto other sectors of the economy.

Likewise, Secretary Paulson in a press briefing on the President meeting with economic advisors, August 18, 2006, stated, “many Americans aren't feeling the benefit because they are clearly better off as a result of a strong economic growth and job creation.” Moreover, in March of 2007, the Washington Post reported that Secretary Paulson said, “the economy is healthy, inflation seems under control and the U.S. should not perceive China as an economic enemy.”

And in July of this year, according to the AP, President Bush told the American public that he thought the economic system is basically sound.

If these government officials, including the President, could not foresee that the economy was in trouble, how can they prescribe economic remedies?

The remedies reside in looking at the economy from a holistic framework, not merely from the point of view of the financial fat cats and their Washington friends.

The public and the Democrats in Congress must demand that homeowners at risk must be included in the bailout, or there is no bailout deal.

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